Canada Emergency Response Benefit (CERB) payments, how do they affect your tax return?

The Canadian Government has approved the issuance of an unprecedented amount of benefit payments to individuals, in response the large number of individuals who have unfortunately lost their jobs, as part of the COVID-19 response lockdown. It is important to note, the CERB payments are considered as taxable income, and does not have any income tax deducted at source like regular EI payments. This means that when you file your 2020 tax return, you will be required to pay income tax on the CERB payments received. This could come as a shock, and would be a very unwelcome surprise when filing 2020 tax returns.

It is advised that individuals receiving the CERB payments do their best to try to save some of the funds, as a portion will need to be repaid to CRA when filing the 2020 tax return. The amount that will need to be repaid as tax will depend on the individual’s total income for the tax year. Individuals in a higher tax bracket will be required to repay a larger amount than others in a lower tax bracket. We know it will be difficult to try to save some of the CERB payment, especially with the cost of living and rent, however any amount saved would help in bring down the balance owing at year end.

The due date on balances owing to CRA for the 2020 tax year is April 30, 2021.

First time tax return filers who have mailed their returns to CRA

We have been contacted by first time tax return filers who have mailed their 2019 tax returns to CRA. We have been informed by CRA representatives that they are no longer processing paper returns, in response to departmental closures forced by COVID-19. Unfortunately, this means for many first time tax filers who independently submitted paper tax returns to CRA will be waiting a lot longer than the usual 16-18 week to receive their refund.

However, CRA have not authorized EFILE registered tax return companies to be able to file tax returns online for individuals who have already submitted their returns via mail to CRA. When a tax return is filed online, the refund is usually issued in 2-3 weeks. For individuals who have been laid off due to a shortage of work, a tax refund being issued in a more timely manner could come in handy.

Have you returned home prematurely due to COVID-19 and have still received quarterly GST/HST credit payments?

In the last month, there are people who have unfortunately been forced to return to their home country prematurely due to COVID-19. If you have not updated CRA to let them know that you have moved back home, you will continue to receive the GST/HST credit payments as normal. Unfortunately, if you have exited Canada, you no longer qualify to receive the credit payments, as they are reserved for individuals who are currently tax residents of Canada. If you have been receiving the quarterly payments, CRA will request that the funds be returned to them after they have processed your 2020 tax return, and realize that you ceased to be a Canadian tax resident in early 2020.

It is advised that if you have left Canada, or are planning on leaving Canada soon, that you update CRA once you cease to be a Canadian tax resident.

Get in contact with us today for a free quote.

There have been many changes made by CRA to the current 2019 tax filing schedule, and increases to benefit entitlements. It is advised to keep track of the changes, as you may be entitled to a payment deferral, or increased benefit payments.

2019 tax filing deadlines changes for regular individual tax returns

CRA have extended the tax filing deadline for 2019 regular individual tax returns (T1 returns) to June 1, 2020, which has changed from the usual date of April 30. This means that if you have a balance owing to CRA for a shortfall in tax being deducted from your 2019 pay cheques, you will not be hit with a late filing penalty unless you file after June 1. If you are employed, and have a balance owing when filing your taxes, you will not need to pay the balance to CRA until the end of August 31, 2020, after this date your tax balance owing will start incurring interest.

2019 tax filing deadlines changes for self-employed tax returns and GST remittances

For self-employed, contractor, sole-proprietor and partnerships, the tax filing deadline remains as June 15, 2020. Good news though, you will not be required to settle any balances owing on your 2019 tax return until the end of the day August 31, 2020.

More good news, if you are required to file and remit GST for the 2019 period, the filing deadline for annual GST filing is still June 15, however the payment deadline for net GST amounts owing has been moved from April 30 to June 30.

Changes to GST/HST credit benefit payments

CRA has increased the GST/HST credit amount in order to further assist those who qualify to receive the credit, during these financially testing times.

If you normally receive the quarterly credit and have filed a 2018 tax return, then you will automatically receive up to $443 if you are single and $580 to $1,160 if you are married. You are not required to have filed your 2019 tax return in order to receive the increased GST/HST credit amount

Why you should still file your return as soon as possible, especially if you are a newcomer to Canada

There are many benefits to filing your return on time, rather than using the filing extensions. If you qualify to receive the quarterly GST/HST credit for the upcoming 2020 year, then filing your 2019 tax return on time will ensure that there are no delays with receiving the credit payments on time.

If you are new to Canada in 2019 and are looking to apply for the Canada Emergency Care Benefit (CERB) payment, you will need to have access to an online CRA account. The easiest way to become authorized to set up an online CRA account is to file a tax return. The quicker you file your 2019 return, the quicker it will be processed by CRA, and then you can set up an online account with CRA.

Questions

If you have any questions about changes made to CRA’s 2019 tax filing and payment deadlines, please do not hesitate to ask one of our team via email.

Have you received a reduced tax refund amount which is different to the amount you were expecting to receive? Try not to panic, there is a strong possibility that CRA have made a mistake when processing your tax return. What should you do?

Review your Notice of Assessment

When CRA process a tax return they issue a Notice of Assessment to you. This will be received either by mail or online to your online CRA account. You will receive your Notice of Assessment via mail at the same time as receiving your tax refund cheque. If you are set up with direct deposit tax refunds, there may be a delay between receiving the mailed Notice of Assessment or electronic copy. Your Notice of assessment will hold the key to understanding why your tax refund has been changed.

Tax return changes – Some common causes

Calculation error

We all make mistakes, including CRA. Sometimes CRA’s automated processing system will incorrectly adjust your tax return, resulting in a different tax refund amount being issued

Missing Relevant (T4) information

When you file your tax return, it is important that all relevant information (including T4 information) is included in your calculations before the tax return is submitted to CRA. Failure to include all T4 information will result in CRA making an adjustment to your tax refund amount, when they include all relevant information.

Immigrant/emigrant tax returns

If you have a date of entry (immigrant) or a date of exit (emigrant) on your tax return, it is very possible that CRA may have made an error with processing your tax return. We see more clerical errors made on average with immigrant and emigrant tax returns.

Non resident tax return

CRA will sometimes made adjustments to individuals tax residency status. Sometimes in error, CRA will change your status from tax resident to non-resident if their automated system incorrectly identifies dates of entry and exit, this usually happens when individuals do not file a tax return for the year they first arrive in Canada. Depending on your situation, CRA may be correcting your tax residency status

What should I do?

Depending on the change made to your tax return, you can either accept the changes made by CRA, or you can dispute them. There is typically an explanation portion on your Notice of Assessment giving a brief description of the changes which have been made to the original filing of your tax return. If you believe CRA have incorrectly adjusted your tax return, you will be able to dispute the changes made.

If you review your Notice of Assessment there will be a contact number that can be used to call CRA and speak with a representative. The CRA representative will be able to provide instruction on disputing the changes.

If in doubt contact your tax accountant

If you are unsure as to why CRA have made changes to your tax return, and your possibility of a successful dispute, it would be wise to contact your tax accountant (if you have one). They will be able to review your Notice of Assessment and advise the best course of action for a dispute. At jackstaxback we offer complimentary post tax filing advice to all clients, ensuring that any CRA clerical errors resulting in a reduced tax refund are reversed, and the correct refund amount being issued.

We often here our clients say ‘What are my tax obligations for being an Airbnb host, and what must I am required to declare to be tax compliant’

Many of us have enjoyed the supplemental income of being an Airbnb hosts over the past few years, unfortunately it does bring the added responsibility of reporting rental income when filing a tax return, and in some cases is may even be considered as ‘business income’. There are steps you can take to ensure that you are being ‘tax compliant’.

Rental income or business income?

The majority of Airbnb hosts receive payment for short-term rental services provided to their guests. This income is to be recorded as rental income when filing a Canadian tax return at year end. However, there are some people who provide other services such as meals, laundry (other than towels and linen), in which case this income can be viewed as business income (self-employed income). Neither rental income, or business income has tax deducted at source, and therefore needs to be paid to CRA at year end when filing a tax return. If you are unsure of the type of income you need to declare on your tax return, please feel free to contact the Jackstaxback team.

How does rental income affect my tax return?

If your Airbnb income is treated as rental income on your tax return, you will be required to fill out a T776 as part of your federal T1 tax return. If the income is to be treated as business /self-employed income you will be required to complete a T2125 as part of your T1 tax return. Both forms can be complicated to figure out at first glance if filing your taxes yourself, and we do advise people to seek advice from a tax return specialist or accountant. Failure to report the income correctly could result in future warnings or penalties from CRA.

GST responsibilities

Currently, charging GST is the responsibility of the host. If you expect to earn over $30k in self-employed/business income from Airbnb you are required to apply for a GST number, and incorporate GST as part of your fee to guests. As with all services and goods provided within BC, you are legally required to charge GST on those goods or services should your revenue surpass $30k within any 12-month period. You will also be required to file a GST return alongside your tax return at year end, a service which is offered by Jackstaxback.

Why you should be tax compliant

Failing to be tax compliant can result in hefty fines/penalties from CRA if your tax return is not correctly filed. Any omissions of information, or misfiling of information with your tax returns are frowned upon by CRA, and their audits can mount if you are unable to provide them with the information they require.

It is always advised that tax returns should reflect the financial transactions that occurred in the year, in order to stay on the ‘good’ side of CRA. It is also advised that organized logs of receipts and expenses are kept in order, to ensure that potential audits are easily resolved.

Questions

If you have any further questions regarding your rental income or all other tax matters, please send us an email. The experienced Jackstaxback team are more than happy to answer any questions you may have, after all, tax doesn’t have to be taxing.

Some employers require employees to go above and beyond with regard to incurring personal expenses in order to carry out their role. This sounds harsh, but is the reality for a lot of workers. There is however a silver lining for some, you may be entitled to claim some of the expenses on your tax return, and hopefully pump up your tax refund.

What expenses can be claimed

There is a vast amount of expenses which can be claimed, the most common ones being:

• Motor vehicle expenses (Gas, insurance)
• Cell phone expenses
• Use of home expenses (rent, mortgage interest)
• Meals and entertainment

How do I qualify to claim the expenses?

Depending on which type of expenses you are looking to claim, there are difference criteria that need to be met. The main criteria are that the employee was required to use their own funds in order to carry out their job, and that they were not reimbursed by their employer for those costs. For example, if you receive a large monthly car allowance from your employer, you are not able to claim vehicle expenses incurred on your tax return, as you have been reimbursed.

It can be quite confusing to understand what criteria need to be met to claim each of the expense types. If you have any questions, please feel free to contact the Jackstaxback team.

How do I claim the expenses?

If you qualify to claim the expenses, you can ask your employer to fill out a form ‘T2200 Declaration of conditions of employment’. It is a form that outlines the employer’s authorization for you to claim the expenses on your tax return. The T2200 allows CRA to understand why the individual was required to incur the expenses, and that they were incurred in order to do their role. The information will then be entered onto a form T777 on your tax return, in order to submit the expense claim to CRA when filing your taxes.

Please note, CRA can overturn your claim for the expenses, even if your employer has signed a T2200, if they deem the expenses were not allowable.

Do I need to keep receipts?

If audited by CRA, you may be required to provide them with receipts to prove that you had in fact incurred those expenses. In some case CRA will accept credit card or debit card statements as proof of purchase, however they usually require receipts. CRA may also request a copy of your T2200 which must have been signed by your employer. You should keep a copy of your T2200 in your records along with your receipts for the tax year.

What are the chances of being audited?

CRA carry out audits every year on a percentage of tax returns. The more items that are being claimed on a tax return, the more probable that it will be audited by CRA. There have been an increasing number of tax returns being audited with regard to T2200 expense claims. CRA are strict on the requirements to claim T2200 expenses, and as such they carry out a lot of audits, ultimately overturning a lot of the T2200 claims which have been filed.

Questions

If you have any further questions regarding any expense claims, and your potential eligibility to claim them, please send us an email. The experienced Jackstaxback team are more than happy to answer any questions you may have, after all, tax doesn’t have to be taxing.

There are many of us out there who are self-employed/contractors, but only a small percentage of us are fully prepared when it comes to the differing complexities of filing our tax return as self-employed/contractor come year end. There is a large group of workers who are forced to be contractors, as opposed to employees, which often leads to a lack of awareness when claiming all expenses for tax filing.

Declare all income

As someone who is self-employed/contractor, you are required to declare your income yourself, unlike someone who is an employee and receives a T4 stating their total employment income. It is your responsibility to declare ALL your self-employed income on your tax return. If CRA discover that there is missing income from your tax return, you will be hit with severe ‘failure to report’ penalties.

Claim all allowable expenses on your tax return

As a contractor your taxable income is reduced by the amount of your expenses. In short, the more expenses you claim, the lower your tax bill for the year. In order to reduce your taxable income as much as possible, you will want to claim every expense that applies to you. The types of expenses you can claim will vary depending on your type of work, however there are some common expenses which can be claimed by the majority of contractors on their tax return:

• Office use of home
• Vehicle expenses
• Cell phone expenses
• Meals & Entertainment
• Professional fees

To maximize your expenses claimed on your tax return, you should research which expenses apply to you!

Be aware of GST and how it affects you

If you are going to earn over $30k in self-employed/contractor income within a 12-month period, it is very probable that you should be charging GST on the services that you are providing. If you believe you will earn more than $30k in a 12-month period you should research if charging GST on services applies to you, ensuring you are GST compliant.

If you charge GST you will need to file a GST return with CRA as well as an income tax return.

File your tax return on time to avoid penalties

As the vast majority of contractors will owe money to CRA at year end when filing their tax return, it is important that the returns are filed on time, and that the balance owing is settled before the deadline. Failure to file and pay on time will lead to penalties and interest charges being incurred from CRA. The date at which balances owing to CRA must be paid is April 30^th. The deadline to file your tax return is June 15^th.

If in doubt, seek help from a professional

If you are unsure about filing your self-employed tax return, or any other requirements or compliancy issues surrounding your tax return, it may be wise to contact a professional. Failure to be fully compliant with declaring income and GST charged can lead to an expensive fix with CRA, a professional will be able to help you navigate these hurdles. Claiming all possible expenses on your return will ensure you keep more of your hard-earned money.

If you have any questions surrounding your self-employed/contractor tax return, please get in contact with the jackstaxback team today. We will be more than happy to offer advice and help easy any reservations you may have. Tax doesn’t have to be taxing.

Many university students, and individuals on gap years are starting to choose Canada as a destination to live and work for a short period, many of whom choose the summer break. As with most sought after destinations, high monthly rentals and living costs force tourists to take on employment to fund their stay. If you are living, and working in Canada, the chances are you are required to file a tax return at the end of the year, and a lot of workers will be entitled to receive a refund.

I was only in Canada for a month, do I still need to file a return?

Yes. If you have taken on employment in Canada and have income, you will need to file a tax return, no matter how short of a period you were here. Depending on how long you were in Canada will dictate whether you file as a tax resident, or non-resident.

Why should I file a tax return?

As well as being legally obliged to submit your return to CRA, there are also benefits to filing a tax return. If you are planning on residing in Canada for the next year or so, you may be entitled to receive a quarterly credit (free of charge!). You can only apply to receive the credit if you have filed a tax return. Non residents and tax residents are all entitled to receive a refund based upon their tax calculations.

Am I a tax resident or non-resident?

The most common way to determine your tax residency is the amount of time you have resided, or are planning on residing in Canada. Typically, if you reside in Canada for 6 months or longer, you will file your taxes as a tax resident. As with most things, there are exceptions to this rule of thumb. By speaking with a tax specialist or accountant, you will be able to confirm your tax residency. If you are unsure, please feel free to contact the Jackstaxback team.

I am a non-resident for tax purposes, how does this affect my refund?

As a non-resident, you are usually required to pay a flat tax rate of 25% on your income whilst in Canada. This is higher than usual, and quite unfair on short term foreign workers. Because of this, most non-residents actually owe money to CRA at year end when filing their taxes, as their employers usually fail to deduct enough tax from their income.

However, if 90% or more of your world income for the year is from Canada, you are awarded with a balance of Canadian tax credits, these will shelter you from paying tax on the first $11k (roughly) of your income. In most cases this results in individuals receiving a tax refund, rather than owing money to CRA.

We recommend that workers expecting to be considered as non-residents request their employers to tax their income at a higher rate, in anticipation of being required to pay 25% of tax o income.

Again, there are a lot of variables involved with calculating your refund eligibility, particularly when filing as a non-resident. If you have any questions, please get in touch.

Questions

If this information has left you with more questions than before, and you are unsure of your tax obligations, please send us an email. The experienced Jackstaxback team are more than happy to answer any questions you may have, after all, tax doesn’t have to be taxing.

Make sure you will receive your 2019 T4s from ALL employers

In order to file your 2019 tax return, you will need your T4 from all employers where you were employed during the tax year. It is important to make sure that your old and current employers have your current mailing address, as well as an email address so that you receive your T4 via email or mail. We have heard stories of small business employers (with an unorganized payroll) mailing T4s to old addresses, then refusing to reissue a replacement T4 due to ‘technical difficulties’.

File your tax return on time

It is important to file your tax return by the end of the April 30^th deadline (June 15^th if self-employed). By filing on time, it enables CRA to issue all available federal and provincial tax credits to you, filing late can result in missing out on certain provincial tax credits. If you are a newcomer to Canada, the sooner you file, the sooner CRA can calculate and issue any quarterly GST/HST credit cheques you may be entitled to receive.

Do not assume you are due a tax refund

In some cases, you may have a balance owing to CRA for a shortfall in tax deducted from your income during the year. This is particularly common when filing a tax return with multiple T4s for the tax year. If you have a balance owing, it is important to file your tax return on time to avoid any late filing fees. You will also be hit with interest penalties on the balance owing. Make sure you know whether you are due a tax refund or have a balance owing before the April 30^th tax filing deadline, then you can plan accordingly.

Set up your online CRA account

Once you have filed a tax return with CRA, you become authorized to set up an online CRA account. It becomes a lot easier to track your tax return filings, correspondence and notices of assessment from CRA, as well as being able to manage your direct deposit details, and address information.

File a tax return even if you’re filing late

Even if you are filing your tax return late, you should try to file it as soon as possible. If you owe tax to CRA due to a shortfall in tax deducted from your pay cheques during the tax year, the quicker your return is filed the sooner you stop paying late filing fees on the balance owing. It is always beneficial to file your tax return as soon as you can. Procrastinating can lead to surprises when your tax return is finally filed, including late filing fees and interest penalties.

File your tax return with the correct address (This should be obvious)

If you are planning on moving address during the time that your tax return will be processed by CRA, you should enter your new address onto your tax return for filing with CRA. By entering the new address onto your tax return, it will automatically update your address with CRA, allowing all tax related correspondence to be sent there (rather than your old address).

If you’re stuck with your tax return, ask a professional for assistance

If you are feeling overwhelmed by your tax filing requirements, and keep pushing back filing your tax return, you can always turn to a professional for assistance. The jackstaxback team is always happy to take the weight off your shoulders and ensure that your return is filed correctly. If you are interested in a free consultation, please message us today. Tax doesn’t have to be taxing.

When working for a new employer we can sometimes get caught up and forget to review the boring admin details with the employer. Especially if we are busy with the new found work and other activities associated with moving to a new city. This can leave us unaware of our employment status, which can have costly results.

Determining your employment status

If you are being paid through a payroll system, whereby you are receiving a paystub outlining your gross pay, tax, EI, CPP, and net income, you are an employee. This means your employer is correctly deducting tax from your income and paying it to CRA on your behalf. You will receive a T4 at the end of the year summarizing your pay and tax contributions, this will be used when filing your tax return.

However, if you are not receiving a pay stub, and are in fact being paid either cash or EFT into your bank account, you may not be having any tax deducted from your pay. This could mean that you are being treated as a contractor/self-employed by your employer. We would recommend that you speak with your employer to discuss your employee status, and to make sure you know where you stand.

What can go wrong?

Whether deliberately or accidentally, some employers have failed to inform workers that they are contractors rather than employees until year end, when the worker usually asks for their T4 to file their tax return. Why is this a bad thing? Well, as a contractor you do not have tax deducted from your pay cheques, meaning you are required to pay the tax to CRA at year end, upon filing a self-employed/contractor tax return. This can come as a complete surprise, and can be a very large, unexpected tax bill to the CRA.

Why would an employer do this?

When paying a worker on a contractor basis, it can benefit small businesses who do not wish to make the employer contributions of tax to CRA. Therefore, saving themselves money by recruiting contractors as opposed to employees, they do not always inform workers of their decision. This sort of behavior from employers is technically legal, and a complaint against them to CRA would not wipe of the outstanding tax balance because you ‘did not realize’. It is always best to ask your employer for a pay stub (if they do not automatically issue one to you) and make sure you are aware of your employment status.

We see cases where people decide to leave Canada at the end of the financial year, rather than paying the unexpected bill to CRA. This is illegal and would be a red flag against any future work permit applications. Also, it can force people who wanted to stay in Canada and seek permanent residency to flee.

Benefits of being Self-employed / Contractor

If you are aware of your contractor status from the beginning of your work agreement, you can make the most of the benefits from being self-employed / contractor. You will be able to start keeping track of your allowable expenses, and making sure you have copies of receipts. Depending on your industry and role, you can often pay lass tax to CRA when being a contractor as opposed to being in the same position as an employee when paid the same hourly rate.

How does it affect your tax obligations?

It is typically more difficult to file a tax return when being self-employed / contractor. This is because there are a wide range of expenses which can be used to apply against your income. The aim being that the lower your taxable income, the less tax you pay. We advise that self-employed/contractors get in contact with our experienced team to ensure the lowest possible balance owing to CRA.

Questions

If you have any more questions about your tax return or all other tax related issues, please send us a message. We are more than happy to answer any questions you may have, after all, tax doesn’t have to be taxing.

For those of you that are still waiting on your T4 from your employer, you should have received it by now.

Your employer’s responsibility

It is your employers responsibility to file and provide your T4 from the previous year, by the last day in February of the current year.

The official wording from CRA specifically states that employers must:

Give employees their T4 slips on or before the last day of February following the calendar year to which the slips apply.

What to do if you still don’t have your T4

For those that have not received your T4 yet, the best method is to contact your employer directly and request them to send you a copy. Many will be able to provide this via email, which is particularly useful if you are no longer living in Canada and is the quickest method of obtaining it.

Accessing T4s through your myCRA account

Another option of accessing your T4, especially if it is from a previous tax year, is by logging into your myCRA account. This can give you access if your employer filed it in a previous year.

Still confused or have questions on your missing T4?

Get in contact and we’d be happy to answer any questions regarding getting your T4.